Real earnings management activities prior to bondissuance
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Date
2017-06-01
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Authors
Mellado-Cid, Cristhian
Jory, Surendranath R.
Ngo, Thanh
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Abstract
We examine real activities manipulation by firms prior to their debt issuances andhow such manipulation activities affect bond yield spreads. We find that bond-issuing firmsincrease their real activities manipulation in the five quarters leading to a bond issuance. Wedocument an inverse association between yield spread and pre-issue real activities manipula-tion, i.e., firms engaged in abnormally high levels of real activities manipulation are associatedwith subsequent lower cost of debt.
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10.1016/j.brq.2017.04.004